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Recession, Libor, Facebook hit banks

Tuesday, July 31, 2012 - 02:16

July 31 - A slew of grim second quarter results hit Europe's banks with UBS, Deutsche Bank, and BBVA reporting huge losses. Ciara Sutton reports.

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A big day for earnings became a bad day for the banks. UBS's net profits shrank over half after being hit by a slump in trading and a three and a half million dollar loss on its shares in Facebook. The Swiss bank, which employs over 63,000 staff is currently cutting three and a half thousand jobs. It also blames the sharp fall in second quarter profits on dwindling client activity in the face of the euro zone crisis. That was a problem for Germany's Deutsche Bank too. Profits at the investment bank plunged over 60 percent. And the company says it will slash nearly 2000 jobs to cut costs. Manoj Ladwa is Senior Trader at TJ Markets. (SOUNDBITE) (English) SENIOR TRADER AT TJ MARKETS, MANOJ LADWA, SAYING: "They are having a torrid time at the moment. It's one scandal after another. What we are seeing certainly with UBS's earnings out earlier today is that revenue is dropping sharply, trading volumes have shrunk dramatically over that last few months, and therefore, their fees have dropped. The investment banking side is suffering and I think it is going to be the case for the next six months or so." Profit at Spain's second biggest bank BBVA tumbled over a third for the first half of the year. Michael Hewson from CMC Markets says the slew of bad results highlights the fragility of the sector. (SOUNDBITE) (English) Market Analyst, CMC MARKETS, MICHAEL HEWSON, SAYING: "There have been some fairly good results. Barclays actually did quite well, HSBC results weren't too bad. But behind all of that is the uncertainty surrounding the regulatory environment going forward, and obviously you've also got the concerns about the solvency of banks in Europe, that's going to be a drag, and the banking sector is going to endure a very volatile time." The recent Libor scandal hasn't helped either. Swiss regulator FINMA is questioning UBS and Credit Suisse over the interest rate manipulation, although they're not under formal investigation. Several European banks are under the spotlight for suspected rigging of euro interest rates and it could cost the industry between 20 and 40 billion dollars. That would be a hefty blow to a sector already struggling to work its way through the economic downturn. Ciara Sutton, Reuters.

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Recession, Libor, Facebook hit banks

Tuesday, July 31, 2012 - 02:16